While the retail sector showed signs of a rebound in 2018, it’s also finishing off the year with record store closures by square footage.
As of August, announced closures had already surpassed last year’s record of 105 million square feet, according to data from real estate research firm CoStar. In total, retailers announced that they would vacate 145 million square feet of space in 2018. Much of the newly vacant space was formerly occupied by Sears and Kmart, but the retailers cleared out of 150 locations this year amid an October bankruptcy filing by parent company Sears Holdings.
Beleaguered Bon-Ton, which filed for Chapter 11 protection in February, announced in April that it would liquidate more than 200 stores nationwide, accounting for another 24 million square feet. Finally, Toys ‘R’ Us’ liquidation of 800 U.S. stores has flooded the market with millions of square feet of available space.
While retailer bankruptcies have become almost commonplace in the wake of the Great Recession and the rise of Amazon, this year was notable for the number of big-box chain closures, which together encompassed a staggering quantity of square footage in malls and shopping corridors around the country. With many retailers looking to streamline rather than expand their brick-and-mortar footprint, filling spaces as large as 50,000 to 100,000 square feet has presented landlords with a challenge.
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For some — particularly those with prime properties — the loss of Sears has been an opportunity to welcome new tenants (including unconventional ones like gyms, co-working spaces and digital-first direct-to-consumer brands) at higher rents than the chain was paying on its longterm leases, but for mall owners in struggling locations, such creative tactics are harder to execute after an anchor tenant vacates.
Will 2019 see even more vacancies? Sears has already put another 40 stores on the chopping block for the new year, while L Brands is closing all 23 Henri Bendel locations by January. Analysts have also warned that J.C. Penney could see more closures in the near future after shuttering 140 last year.
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